Institutional Investors Are Wading In
Markets in India hit fresh all-time highs in trades on Tuesday led by a strong rally in large-cap private banking shares
On Episode 325 of The Core Report, financial journalist Govindraj Ethiraj talks to Jay Kothari, senior vice president at DSP Mutual Fund as well as MS Mani, Partner at Deloitte India.
Our Top Reports For Today
SHOW NOTES
(00:00) The Take
(02:12) Stories Of The Day
(03:05) Institutional investors are wading in, sending markets to new highs. Sensex hits 78,000
(04:01) NVidia cracks, that’s a warning signal for overheated Indian stocks too.
(06:11) Oil prices are still holding high
(06:51) Where India stacks on the emerging market universe right now.
(16:47) Qatar Airways is World’s Best Airline, Vistara Is India’s Best.
(18:28) The unfinished agenda on GST, the tension between the Government and the taxpayer
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
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Good morning, its Wednesday, the 26th of June and this is Govindraj Ethiraj broadcasting and streaming from and headquartered in Mumbai, India’s financial capital
The Take
Did you know that more than half of households in the United States own mutual funds, roughly 54% to be specific.
This translates to some 121 million investors and some 71 million households.
This figure has been rising though steadily and has also been even in some years.
Total assets in US registered investment companies, including mutual funds, ETFs, closed ended funds and unit investment trusts, stood around $32 trillion as of mid 2023 and households around 79% of this or $25 trillion.
Registered fund assets represented about one-fifth of households’ financial assets.
This is from an Investment Company Institute survey last October.
The point is that the US is a mature market when it comes to individual investors owning stock. Considerably so as the numbers suggest with 1/3rd the population as we saw.
And remember, we are only speaking of mutual funds so far.
In India, mutual funds are attracting 6% of household savings in India, which is a fairly firm start.
The moral of the quick story is obviously to invest institutionally, even if some mutual funds seem to be facing credibility issues.
Investing directly, unless you are really confident at peaks is not a very good idea.
Institutional investors domestic and international, particularly those with pedigree, blend science and art and of course the best ones have patience as I have seen.
Patience to see around corners and stay fixed on the long term, even if they enjoy the short term rides, as perhaps many are.
And our top stories and themes for the day:
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Markets Scale New Peak
Markets in India hit fresh all-time highs in trades on Tuesday led by a strong rally in large-cap private banking shares.
The nature of this rally suggests though I might be wrong that more institutional investors are buying, including overseas ones, because they prefer banks and big caps and big names.
The S&P BSE Sensex rallied past the 78,000-mark for the first-ever time and registered a summit at 78,105. It settled at 78,053, up 712 points or 0.92 per cent.
Similarly, the NSE Nifty50 climbed above the 23,700 level for the first time to touch a record high of 23,735.5. It ended with gains of 183 points or 0.78 per cent at 23,721 level.
The broader BSE MidCap and SmallCap indices, however, slipped in trade, closing 0.26 per cent and 0.03 per cent, respectively.
Markets Get A Lesson In Gravity
Nvidia Corp. shares entered correction territory on Monday, as an ongoing selloff erased a historic amount of value for the AI-focused chipmaker.
This subsequently is set to rebound but the drop should be an object lesson to those who believe in one way streets.
The stock fell 6.7%, its third straight negative session and biggest one-day percentage drop since April. The three-day drop erased about $430 billion from Nvidia’s market capitalization, the biggest three-day value loss for any company in history, according to data compiled by Bloomberg.
Shares fell 13% over the period, past the 10% threshold that represents a correction. The drop weighed on chipmakers with the Philadelphia Stock Exchange Semiconductor Index falling 3% on Monday. Broadcom Inc. fell 4% while Qualcomm Inc. dropped 5.5% and ARM Holdings Plc slumped 5.8%. US-listed shares of Taiwan Semiconductor Manufacturing Co. shed 3.5%
The drop put Nvidia’s valuation back below the $3 trillion threshold, and under both Microsoft Corp. and Apple Inc. in size. Nvidia briefly claimed the title as the world’s largest stock last week.
Even with the slump, Nvidia remains up nearly 140% this year, making it the second-best performer among S&P 500 Index components, behind Super Micro Computer Inc., another favourite AI play.
The stock suffered a drawdown of about 20% earlier this year, although it quickly returned to all-time highs.
The scale of Nvidia’s rally — it soared about 240% over the course of 2023 — has underlined concerns about its valuation.
The stock trades at 21 times estimated sales over the next 12 months, making it the most expensive in the S&P 500 by this measure.
Oil Holding High
Oil was steady near its highest close in eight weeks amid simmering geopolitical tensions from Yemen to Russia.
Brent crude traded near $86 a barrel, after settling on Monday at the strongest level since late April. Houthi militants have ramped up their attacks on ships off Yemen recently, while the BBC reported that Russia has blamed the US for a missile strike on occupied Crimea and warned of “consequences.”
Another bullish factor for futures is tighter supply in the months ahead. Global markets are set for a supply deficit in the coming quarter, the International Energy Agency said in its June Oil Market Report earlier this month.
Implied volatility for Brent has edged higher on the simmering geopolitical risk, including upcoming elections in Iran, although it still remains near the lowest level in five years.
Traders will be watching measures of inflation and other economic data this week for clues on the path for monetary policy, which may impact crude prices.
India And The Emerging Market Story
India is an emerging market when it comes to stocks. What that means is that it is still growing and will grow faster than an emerging - they don’t use that term though - or developed market.
Where it stands in the emerging market universe at a point of time also determines how funds will flow from overseas investors as they have over the last three decades.
With the elections over a new Government in, which is mostly the old Government with some new flavours, the markets are back on even keel, at least on that score.
Foreign portfolio investors who are usually hesitant to play on Government formations have returned to the markets.
Figures show that they are back to net positive buying though for the year that is 2024, they are still net sellers.
So how are flows looking and what is driving FPI investments into India and what is the stack of options looking like ?
I reached out to Jay Kothari, VP at DSP Mutual Fund who speaks to investors all over the world to get a status check on what he was seeing and hearing at this point of time.
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Qatar World’s Best Airline, Vistara India’s Best
If you are a frequent flyer, you will stay with me till the end.
For the 8th time in its 25 year history, Qatar Airways with a fleet of 230 aircraft has been named as the World’s Best Airline by Skytrax in what CNN calls the Oscars of commercial aviation.
The prize is in recognition of the quality of service it offers to passengers on a modern fleet.
Tata & Singapore Airlines owned Vistara was named best India/South Asian carrier.
Singapore Airlines itself came second to Qatar Airways in the global ranking though it was first last year.
One interesting thing about the Top 10 ranking.
There is no airline from North America.
Dubai’s Emirates was third, Japan’s ANA All Nippon was in fourth place and Cathay Pacific was fifth.
UK-based Skytrax said the votes, gathered from surveys of more than 21 million customers from 100 countries about 350 airlines, were the closest run since the awards began in 1999, requiring a recount, according to CNN.
Other prizes include Singapore Airlines for the World’s Best Cabin Staff who also won Best First Class service and Best Airline in Asia.
AirAsia, also present in India, was once again crowned the World’s Best Low-Cost Airline – repeating an achievement it has made every year since 2010.
Ethiopian Airlines was named Africa’s best, for the sixth year in a row. Turkish Airlines was Europe’s best.
Back to America or North America, who do you think got the Best Airline prize?
Well, it's Delta Airlines.
What are the big and pending Goods & Service Tax issues from industry’s point of view?
The recent announcements touched on some possible waivers on penalties and interest on old demands as well as a whole new extremely micro rate adjustments like some services offered by Railways, hostels, milk cans, cartons and solar cookers - are so diverse and wide that each of them suggest that a specific lobby has triumphed rather than merit.
Just to remind us all, GST came into effect only in 2017 and I would argue has got progressively complex and challenging to navigate every month since then it would appear.
I reached out to M.S. Mani, Partner at Deloitte India and began by asking him for the present unfinished agenda.
